Bank regulation and supervision of China

1. why we need bank regulation and supervision？

Since 1990s, banking crises is becoming one of the most concerned part in the world. Especially, after the Asian financial crises in 1997, most of countries in the world tried to strengthen the regulation of banking industry. So, the bank regulation and supervision tend to be much more essentially. As we know that, the banking regulation and supervision is controlled by government. The supervision department use laws, institutions and rules to regulate the security of financial system, also protect for the customer’s interests.

In China, the banking sector developed very fast in recent years, the management capability is increasing during this time, particularly after accession to WTO, some foreign banks flowed in, which affect the current banking regulation, and also can make the financing system changed. The banking regulation and supervision goes to more imperative in the financial market.

According to Liu (2009), at the end of 2008, the total assets of China’s banking industry is  62.4 trillion RMB, which went up about a half than that in 2003. Meanwhile at the end of 2008, the Industrial and Commercial Bank of China, China Construction Bank and Bank of China became to the most three influential banks in the world. From the above figures we can get that Chinese banking industry developed rapidly, so we need a high level regulation institution to protect the financial market. http://www.asianbankerforums.com/summit2009/highlight_liu.php

The purpose of Chinese banking regulation and supervision mentioned by Deng (2009) is to make the banking supervisory procedures in a standard way; also it’s possible to reduce the financial risks in the banking sector, and to give a promotion for building a safe, reliable, and rational banking industry in China.